Workers’ Compensation becomes an election issue in South Australia

On 12 February 2010, the Greens parliamentarian, Mark Parnell, accused WorkCover Corporation of failing injured workers in South Australia.  In response to the release of the Parliament’s Statutory Authorities Review Committee (SARC) inquiry into WorkCover, he said

“The Greens have been saying for a number of years now that the outsourcing of WorkCover’s claims management is a failed experiment, and must be reversed….. Until WorkCover fixes up the poor management of injured workers, it will never get out of its financial mess.”

“WorkCover can no longer outsource this essential responsibility.  The Greens call on WorkCover to take back claims management, and ensure there is a much greater focus on retaining and re-equipping of workers to enable them to return to productive work as quickly as possible.  Ensuring a safe return to work for injured workers is a core WorkCover function, not an add-on.”

Parnell goes on to mention a $A10,000 donation to the Labor Party by the monopoly workers compensation insurer in South Australia, Employers Mutual Limited (EML).  This emphasises the electioneering element of the media release and distracts slightly from the meat of the SARC review.

Parnell’s comments and the review report identify some of the challenges that will hit the workers’ competition sector over the next few years as the Federal Government cranks up the formal review of the nation’s workers’ compensation structures.

The SARC review findings are:

1. “WorkCover should continue the use of satisfaction surveys of workers and employers. The executive summary of the satisfaction surveys should continue to be published on their website and on request the full report should be supplied to interested stakeholders.
2. WorkCover establish a more open and consultative management style with injured workers and interested stakeholders such as the Work Injured Resource Centre (WIRC).
3. That WorkCover’s survey results allow for identification of those workers who return to work and that information be collated on a nationally consistent basis to allow comparisons between jurisdictions.
4. WorkCover should stop its practice of significantly increasing fees, such as its ‘exit or discontinuance’ fee designed to discourage companies from becoming selfinsured. In particular, WorkCover should not proceed with the current fee increases outlined in the Workers Rehabilitation and Compensation (Claims and Registration) (Discontinuance Fee) Variation Regulations 2009, gazetted on 26 November 2009. (See Minority Report of Members Hon C Zollo MLC (Presiding Member) and Hon IK Hunter MLC.)
5. When the claims management contract is next put out to tender the number of claims managers be increased to 2 or 3 to remove the monopoly element of the current system. (See Minority Report of Members Hon C Zollo MLC (Presiding Member) and Hon IK Hunter MLC.)
6. WorkCover should report every year in its Annual Report the level of claimed savings in legal costs under its sole provider contract. (See Minority Report of Members Hon C Zollo MLC (Presiding Member) and Hon IK Hunter MLC.)
7. The independent review to be conducted in 2011 of the impact of the recent changes to the legislation should also review the performance of the WorkCover Board and management in implementing these changes. In particular, the review should consider WorkCover and EML’s performance in the critical area of claims management. (See Minority Report of Members Hon C Zollo MLC (Presiding Member) and Hon IK Hunter MLC.)”

Its seems extraordinary that there are two minority reports from the panel.  These are included in the SARC report as appendices and, in effect, illustrate the party political sensitivities in the review of (only one!) State workers’ compensation system.  The report by Ian Hunter and Carmel Zollo notes that the release of the report so close to an election campaign has provide an unwelcome partisanship to the recommendations.

Part of the reason for their position is that the workers’ compensation scheme has undergone changes throughout the two year inquiry.  The inquiry findings have been built on shifting sands.

There are plenty of media stories about the SA WorkCover system but almost nothing in the past week when the SARC report was released. One article at AdelaideNow.

Worker Injury

One of the most interesting recommendations is number 2.  This also illustrates the importance of delving into the report itself and not relying on the summary as the report contains many quotes from the Committee’s Hansard.

It seems the committee took to heart the evidence from Ms Rosemary McKenzie-Ferguson of the Work Injured Resource Connection (WIRC).  The report quotes McKenzie-Ferguson’s concerns over the lack of communication between EML and the injured worker.

“For an injured worker to build up any kind of rapport or trust, the case manager needs to be in place. We understand that maternity leave happens, we understand that holidays happen and we understand that bereavement leave happens. It happens in everyone’s life.

However, what should not happen is that a case manager should not be there for six or seven weeks and suddenly be changed, and no reason given to the injured worker. Sometimes the injured worker does not know until he or she gets some sort of documentation with a different name on the bottom of the letter, or they may have to make a phone call only to find out that the case manager really does not care, ‘because I’m leaving on Friday, and we don’t know who your new case manager will be, so just suck it up until next Monday and then make another phone call.”

Clearly case management only works when there is a consistent presence for the case manager or there is a strong system of handover or information sharing so that long absences can be covered.

Tendering Process

The SARC recommendation number 5 mentions expanding the number of workers’ compensation agencies to 2 or 3 but this recommendation masks considerable tension.

The Hunter and Zollo minority report says, in relation to recommendation 5:

“We do not support this recommendation.  There was no evidence placed before the Committee that showed that multiple claims agents will result in improved claims performance, case management or improved service to injured workers. We note that significant criticism of WorkCover’s choice to move to a single claims agent and of the claims agent selection process stemmed from entities that were either unsuccessful bidders for the current claims management contract, or whose business operations include the workers compensation market.”

Apparently EML was permitted to lodge a late Expression of Interest. The report quotes extensively from evidence provided by many competing workers’ compensation insurers, amongst them, QBE Insurance, Allianz Insurance and Gallagher Bassett Services.  Notably, Paul Serong, until recently the CEO of Cambridge Integrated Services and one named in speculation of the Executive Director position with WorkSafe Victoria, believed the South Australian market could sustain two or three provider.  Page 39 of the SARC report says

“Mr Paul Serong, CEO, Cambridge Integrated Services, one of the companies to place an Expression of Interest was asked by the Committee whether accepting a late EOI had the “perception of unfairness”.  He replied:-

Mr Serong: Quite clearly it does. Yes, it does raise unfairness. It also could be a consideration, maybe, that information might have been gleaned to that tenderer. To me it smacks of something smelly.

Hon TJ Stephens MLC: Improper.

Mr Serong: Yes, it is improper.”

In February 2010 the Australian Government is being battered over the perception that it cannot manage large scale reform programs.  The OHS reform process has, to now, been spared anywhere near the same level of criticism.  But within a couple of years, national reform of the various State-based workers’ compensation schemes should be near completion.  Going from the competitive and political issues raised above, the reform negotiations may need to be  in a cage and, probably pay-per-view.

Kevin Jones

UPDATE: 16 February 2010

The South Australian Industrial Relations Minister, Paul Caica, responded the the SARC report recommendations in a media statement on 11 February 2010.